|Copyright Dow Jones & Company Inc Jun 17, 1992|
LONDON -- Lloyd's of London scored another victory in a legal battle
with disgruntled investors, as a U.S. judge ruled that Lloyd's
syndicates of market members have no legal existence and so can't be
The ruling is the first in a series of suits brought by 91
members in the U.S. against the London insurance market. The
proceedings, known as Roby vs. Lloyd's, are being handled for the
plaintiffs by New York law firm Proskauer, Rose, Goetz & Mendelsohn.
Lloyd's has about 1,600 members in the U.S., out of a total of about
22,300 individuals who form the market's membership. The 91 plaintiffs,
led by John Roby, a one-time candidate for membership in Lloyd's
Council, allege breaches of U.S. securities and other laws arising out
of their participation in loss-making Lloyd's syndicates.
Lloyd's structure, syndicates of market members form the effective core
of the market by underwriting insurance business. The affairs of
individual members are handled by members' agents, who place their
clients in syndicates, while the syndicates are run by managing agents,
who accept insurance business on behalf of syndicate members.
recent years, many Lloyd's syndicates have run up heavy losses. Lloyd's
accounts for 1989, due to be published this month under a system of
accounting three years in arrears to give time for claims to come in,
are expected to show a staggering #2 billion deficit ($3.7 billion),
four times larger than previous record loss, set in 1988.
number of disgruntled individuals in Britain and the U.S. have sued
Lloyd's and their members' and managing agents to avoid having to pay
for losses. But with the exception of an out-of-court settlement
related to syndicates run by the Outhwaite managing agency, none has
achieved any significant success.
In the Proskauer suit, the 91
plaintiffs named Lloyd's itself, its members' and managing agents and
318 Lloyd's syndicates of which they were members. But in a ruling this
week, the U.S. district court in Manhattan dismissed the suit against
the 318 syndicates on grounds that they have no legal existence under
English law and so can't be sued.
Lloyd's principal defense is
based on the fact that members sign a contractual agreement that any
disputes arising from their membership should be heard in an English
court. The U.S. federal judge upheld that position, said a lawyer at
LeBoeuf, Lamb, Leiby & Macrae, the New York law firm acting for
And though the other suits against Lloyd's itself and
the members' and managing agents are still being heard, lawyers for
Lloyd's said they are confident these suits would also be dismissed.
Credit: Staff Reporter of The Wall Street Journal